Hopes of a breakthrough in the deadlocked global trade talks rose sharply today after leaders of the US, Europe and five developing countries agreed in St Petersburg to a series of tit-for-tat compromises designed to achieve a deal within the next month.

Pascal Lamy seized on the political push given to the trade liberalisation talks provided by the G8 summit to convene a meeting of a small group of key negotiators in Geneva last night.

After attending today's meeting in Russia, Mr Lamy flew back to see whether the declaration of intent from the G8 summit would translate into movement by trade negotiators. "It's now or never," one trade source said. "If we don't crack this in the next month it ain't ever going to be cracked."

Tony Blair - who has for months been pressing for the G8 to provide fresh impetus to the negotiations - said today that the deal would still be difficult to achieve, but that the willingness to move expressed yesterday had made him more optimistic.

"Before our lunchtime discussions, I was somewhat pessimistic," the prime minister said at his closing G8 press conference. "I'm now less pessimistic because around the table in turn President Bush, President Lula [of Brazil], prime minister Singh of India, the president of the European Commission, Jose Baroso and Angela Merkel all spoke very strongly in favour a trade deal and the necessary flexibility being given to their trade negotiators to secure one."

Today's meeting involved the G8 plus five developing countries - China, India, Brazil, India and Mexico. Monday night's talks will involve the EU, the US, Japan, Brazil, India and Australia - seen as a cross-section of the WTO's 150 members.

Mr Lamy believes he has been given a clear signal that Brussels is prepared to offer freer access to its heavily-protected agricultural market; that the US will cut its subsidies to farmers and that Brazil and India will allow more western manufactured goods into their countries.

The talks were begun in November 2001 in the Qatari capital of Doha, and were originally due to be completed within three years. Mr Lamy has warned that time to complete the round is rapidly running out, because in the middle of next year Mr Bush will lose the right to push a bill through congress unamended.

European Union trade chief Peter Mandelson said: "I welcome the urgency at St Petersburg. If we want to do this deal, and in Europe we certainly do, we cannot delay. Delay, because of the clear timetable before us, risks jeopardising the whole round."

Mr Mandelson also said he welcomed a renewed commitment by Mr Bush to the WTO round "but we now need to engage fully as negotiators to take this forward".

The WTO made it clear last night that it was prepared to continue working through August - normally the time when the organisation shuts down for the month - in order to clinch a deal. Sources said that if the talks dragged on into September they would run into the elections in Brazil and the US.

Mr Blair made it clear that there was still a lot of work to be done in order to turn the show of political will at the G8 into a final agreement on freer trade in agriculture, services and industrial goods.

It was, he added, vital for the world economy that a deal was signed, since the potential benefits were up to three times as great as those from the last round of talks - the so-called Uruguay Round - completed in 1993.

"It is important for countries like Britain and the developed world. It is also hugely important for poor countries who have a desperate need to trade into our markets" he said. "It is also important for the multilateral trading system, which is what we believe in. It is better to have a multilateral round than a series of bilateral or regional deals."